NFC: What You Need to Know

By now you may have heard of NFC. It’s been the next big thing for the past five years.

Okay, so maybe this tech hasn’t hit its stride yet. But there are several new mobile phones that claim “NFC” as a feature.

So what does NFC mean, how does it work and will it finally catch on? These are questions that many consumers will have as they hear more and more about this technology — and here are some answers.

What is NFC, in a nutshell?

NFC, which stands for Near Field Communication, is a type of communication that involves wirelessly transmitting data from one hardware device to another physical object, provided that the devices are in short range (within 10 centimeters) of one another.

In order for NFC to work, both devices — say, for example, your smartphone and a payment terminal at your local CVS — have to have NFC chips and antennas embedded in them.

Though NFC might be new to you, the technology isn’t. The industry standard for it was established between 2003 and 2004. Over the past few years, NFC has become more prominent, but it’s still a long way from mass adoption.

So … what is it used for?

Some practical uses include bumping your phone against someone else’s to wirelessly (and paperlessly) exchange your contact information. You can also tap your phone against a laptop or computer to share photo files.

NFC is also used in marketing. You can, for example, tap your phone against an NFC-equipped movie poster or sticker, as long as the paper is embedded with an NFC chip, and more details about the movie will pop up on your phone’s Web browser.

One of the more interesting use cases I came across in my research was a beer dispenser created by a Google employee. It uses an NFC tablet to scan a person’s badge and determine if he or she is authorized to drink the beer. But, so far, the most prevalent use of NFC has been in payments.

But I can already tap my credit card to pay for things. Why is NFC any better than that?

You’re right: Consumers can already use a tap-to-pay method with some newer credit cards. But proponents of NFC on mobile argue that it’s even faster and easier to use the device that’s likely already in your hand — your smartphone — rather than digging around for the wallet that holds that credit card.

Another big NFC pitch is that your smartphone could simultaneously store loyalty cards, coupons, tickets and boarding passes, so you could use your NFC smartphone to transmit and receive data in those accounts, too.

However, that idea of the “mobile wallet,” or moving your credit cards and rewards cards to your phone, doesn’t necessarily require NFC. In fact, the mobile payments industry in the U.S. is pretty divided — there are those who are pushing NFC, and those relying instead on software solutions to make mobile payments.

The former includes Google Wallet, and a wireless industry venture made up of AT&T, Verizon and T-Mobile. The latter includes companies like Square, PayPal and even Apple, which offers a digital wallet app with the iPhone’s Passbook, though this mostly holds purchased tickets for things like flights and movies.

It’s impossible to know how many NFC “tags” are floating around out there, and it’s unclear exactly how many retailers will accept payments from your NFC phone. The roll-out of these NFC solutions has been slow.

And let’s say you have an NFC smartphone and you’ve found a store nearby that will accept it. It still might not be a super simple tap-to-pay solution at first.

In my experience, I had to tap my NFC smartphone against the payment terminal a few times before the transaction went through, and got dubious looks from a couple cashiers who weren’t familiar with the process. I’m positive that swiping my credit card would have been easier.

But at the same time I think that paying with smartphones will get smoother.

Tapping to pay sounds easy … almost too easy. Is NFC secure? What if I lose my NFC phone?

Fraudsters are always trying different ways to tap into sensitive data. NFC technology has varying layers of security, depending on the use case and the hardware. When you link your NFC smartphone to your credit card, your data is actually stored in a tiny part of the hardware — like a little lock box within your phone. In some cases, this is in the SIM card, but it could be elsewhere in the phone, too. But note: this data is encrypted.

On top of that, you often have to punch in a personalized PIN on the phone in order to make a payment.

If your NFC phone is stolen, you can freeze or disable your payment account by calling the services or visiting a website. You can also call the credit card issuers directly and cancel your cards — just as you would if you lost your leather wallet.

So will NFC really catch on this time?

Some industry experts and analysts say NFC is still “three to five years” away from being mainstream — the same thing many were saying, well, three to five years ago. It has gained traction in parts of Europe and Asia, especially in Japan, where the wireless carriers have collaborated to push the technology.

NFC proponents say a mandate requiring retailers to update their payment terminals by 2015 could help nudge the technology along. And NFC is expected to be in more and more phones. All eyes are on Apple right now, to see whether NFC is included with the next iPhone.

But even with all of the tech infrastructure in place, there’s still the matter of changing consumer behavior — your behavior — one tap at a time.

I think the NSA has a job to do and we need the NSA. But as (physicist) Robert Oppenheimer said, “When you see something that is technically sweet, you go ahead and do it and argue about what to do about it only after you’ve had your technical success. That is the way it was with the atomic bomb.”

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